Glossary · Investors & Compliance
Anti-Money Laundering (AML)
Anti-money laundering (AML) refers to the laws, controls and procedures designed to prevent criminals from disguising illicit funds as legitimate assets.
An investment fund’s AML program typically includes a risk assessment, KYC and customer due diligence, sanctions and PEP screening, ongoing monitoring of transactions such as subscriptions, redemptions and transfers, suspicious activity reporting, record-keeping and staff training. Many jurisdictions require funds to appoint designated officers, such as an AML compliance officer and money laundering reporting officer.
International standards are set by the Financial Action Task Force (FATF), and each jurisdiction implements them in local law. Funds often delegate AML procedures to their administrator or transfer agent, but the fund and its board usually remain responsible for compliance.
Pitfalls include unclear delegation agreements, redemption payments to third parties or accounts in different names, weak monitoring after onboarding, and failure to document the rationale for risk ratings and exceptions. Periodic independent testing of the program is expected in many jurisdictions.
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